6th Jul 2016 06:24
LONDON (Alliance News) - Melrose Industries PLC on Wednesday said it has agreed a USD1.44 billion deal to acquire US manufacturing company Nortek Inc and will launch a rights issue of shares to finance the deal.
Melrose operates a 'buy, improve, sell' model, by which it acquires underperforming industrial businesses, restructures and returns them to health, and then sells them on. It said it will acquire Providence, Rhode Island-based Nortek for USD86.00 per share, a 38% premium to Nortek's closing price on NASDAQ in New York on Tuesday. Melrose said it's offer already has support of shareholders representing 68.7% of Nortek, as well as the unanimous support of the Nortek board.
Melrose will finance the deal with a fully-underwritten rights issue of 12 new shares at 95.00 pence per share for each 1 existing share, raising a total of GBP1.61 billion. Melrose shares closed in London Tuesday at 410.14p.
Melrose said it has held pre-marketing meetings with a number of its institutional shareholders who it believes are supportive of the acquisition.
Nortek is a manufacturer of heating, ventilation, air conditioning and home appliance products, Melrose said. In 2015, it reported a headline operating profit of USD220.1 million on revenue of USD2.53 billion.
Melrose said the deal will provide an opportunity for its to follow its existing strategy of acquiring specialised industrial businesses and returning them to health.
"Nortek is a high quality manufacturing business with over 90% of its turnover in North America and product penetration into 80% of US households. It serves attractive end markets at good points in their cycle, with strong brands and market positions. Nonetheless there remains solid potential for further improvement under Melrose's guidance," said Simon Peckham, Melrose's chief executive.
"Our ability to apply our industrial experience and investment expertise, as well as to liberate Nortek from its current capital structure will transform the prospects of the business," he added.
Melrose has been on the look out for a new acquisition after it sold its Elster Group energy metering business to US industrial conglomerate Honeywell Inc for GBP3.3 billion, returning GBP2.4 billion of the funds to shareholders in late 2015.
The company added that it is trading in line with expectations so far in 2016, with Brush "performing satisfactorily".
By Sam Unsted; [email protected]; @SamUAtAlliance
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